<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
COMVERSE TECHNOLOGY, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------------------
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
(3) Filing Party:
------------------------------------------------------------------------
(4) Date Filed:
------------------------------------------------------------------------
<PAGE>
COMVERSE TECHNOLOGY, INC.
170 CROSSWAYS PARK DRIVE
WOODBURY, NEW YORK 11797
------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON DECEMBER 5, 1996
------------------
NOTICE IS HEREBY GIVEN that the 1996 Annual Meeting of Shareholders of
COMVERSE TECHNOLOGY, INC. (the "Corporation") will be held at the Huntington
Hilton, 598 Broadhollow Road (at Route 110), Melville, NY 11747, on Thursday,
December 5, 1996, commencing at 10:00 A.M. (local time) for the following
purposes:
1. To elect the members of the Board of Directors of the Corporation
to serve until the next Annual Meeting of Shareholders.
2. To consider and act upon a proposal to approve the adoption of the
Corporation's 1996 Stock Option Plan and to reserve an aggregate of
1,000,000 shares of Common Stock for future issuance thereunder.
3. To consider and act upon a proposal to ratify the selection of
Deloitte & Touche LLP as independent auditors of the Corporation for the
year ending December 31, 1996.
4. To transact such other business as may properly come before the
meeting or any adjournment thereof.
Only those shareholders of record at the close of business on October 25,
1996 are entitled to receive notice of and to vote at the Annual Meeting or any
adjournment thereof.
A copy of the Corporation's Annual Report to Shareholders for the year
ended December 31, 1995 accompanies this Notice of Meeting.
By Order of the Board of Directors,
William F. Sorin,
Secretary
November 6, 1996
ATTENDANCE AT THE ANNUAL MEETING BY HOLDERS OF AT LEAST A MAJORITY OF THE
OUTSTANDING SHARES OF COMMON STOCK, APPEARING IN PERSON OR REPRESENTED BY PROXY,
IS NECESSARY TO CONSTITUTE A QUORUM. YOUR ATTENDANCE IS IMPORTANT AND
APPRECIATED. WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE COMPLETE,
SIGN AND RETURN THE ACCOMPANYING PROXY CARD. YOUR PROXY MAY BE REVOKED IN YOUR
DISCRETION AT ANY TIME BEFORE THE SHARES ARE VOTED.
<PAGE>
COMVERSE TECHNOLOGY, INC.
170 CROSSWAYS PARK DRIVE
WOODBURY, NEW YORK 11797
-----------------
PROXY STATEMENT
-----------------
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON DECEMBER 5, 1996
-----------------
This Proxy Statement and the accompanying form of proxy are being
furnished in connection with the solicitation of proxies by the Board of
Directors of Comverse Technology, Inc., a New York corporation ("Comverse" or
the "Corporation"), for use at the Annual Meeting of the Shareholders of the
Corporation to be held on December 5, 1996 or any adjournment thereof (the
"Annual Meeting").
A proxy in the accompanying form, which is properly executed, duly
returned to the Corporation and not revoked, will be voted in accordance with
the instructions contained in the proxy. If no instructions are given with
respect to any matter specified in the Notice of Annual Meeting to be acted upon
at the Annual Meeting, the proxy will be voted in favor of such matter. As to
any other matters properly brought before the Annual Meeting, the persons named
in the proxy will vote in accordance with their best judgment. Any shareholder
who desires to revoke a proxy may do so at any time prior to the vote of the
shares by tendering written notice of revocation addressed to the Secretary of
the Corporation, by attending the Annual Meeting in person and requesting the
return of the proxy or by delivering to the Secretary of the Corporation another
form of proxy bearing a later date of execution.
The cost of the solicitation of proxies will be paid by the
Corporation. In addition to the solicitation of proxies by the use of the
mails, regularly engaged employees of the Corporation may, without additional
compensation, solicit proxies by personal interviews, telephone and
telefacsimile. The Corporation will, upon request, reimburse brokers and others
who are only record holders of the Corporation's Common Stock, par value $.10
per share (the "Common Stock"), for their reasonable expenses in forwarding
proxy material to beneficial owners of such stock and obtaining voting
instructions from such owners.
The Board of Directors has fixed the close of business on October 25,
1996 as the record date for determining the shareholders entitled to notice of
and to vote at the Annual Meeting (the "Record Date"). At the Record Date,
there were issued, outstanding and entitled to vote an aggregate of 21,628,730
shares of Common Stock. Attendance at the Annual Meeting, in person or
represented by proxy, by the holders of a majority of all shares of Common Stock
issued, outstanding and entitled to vote constitutes a quorum. Each share of
Common Stock entitles the holder thereof to one vote on each matter presented
for action at the meeting.
This Proxy Statement and the accompanying form of proxy are being
mailed on or about November 6, 1996 to shareholders of record on the Record
Date.
<PAGE>
MANAGEMENT AND PRINCIPAL SHAREHOLDERS
The following table identifies and sets forth certain information concerning
the beneficial ownership of Common Stock at November 1, 1996 by the executive
officers of the Corporation, by each incumbent director of the Corporation
standing for reelection at the Annual Meeting and by each person known by the
Corporation to beneficially own more than five percent of the issued and
outstanding Common Stock.
<TABLE>
<CAPTION>
NUMBER OF PERCENT
RELATIONSHIP SHARES OF TOTAL
WITH THE BENEFICIALLY OUTSTANDING
NAME AGE CORPORATION OWNED SHARES(1)
- --------------------------- --- -------------- --------------- ------------
<S> <C> <C> <C> <C>
Pilgrim Baxter & -- Shareholder 2,211,000 (2) 10.2 %
Associates Ltd.
1255 Drummers Lane
Wayne, PA 19087
Brinson Partners Inc. -- Shareholder 1,469,800 (2) 6.8%
209 S. LaSalle Street
Chicago, IL 60604
Kobi Alexander/(a)(b)/ 44 President,
Chairman of
the Board,
Chief 863,750 (3) 3.9%
Executive
Officer and
Director
Carmel Vernia 44 Chief 227,498 (4) 1.0%
Operating
Officer
Igal Nissim 41 Chief 12,500 (5) (6) *
Financial
Officer
Zvi Alexander 74 Director 20,000 (7) (8) *
John H. Friedman/(b)(c)(d)/ 43 Director 1,000 (5) (8) *
Sam Oolie/(a)(b)(c)(d)/ 60 Director 5,000 (5) (8) *
William F. Sorin/(a)(d)/ 47 Secretary and 25,000 (5) (9) *
Director
Yechiam Yemini/(a)(c)/ 48 Director 29,000 (8) (10) *
All directors and
executive officers as a
group (8 persons) 1,183,748 (11) 5.2%
- -----------------
</TABLE>
* Less than 1%.
(a) Member of Executive Committee of the Board of Directors.
(b) Member of Audit Committee of the Board of Directors.
(c) Member of Remuneration and Stock Option Committee of the Board of Directors.
(d) Member of Corporate Planning and Structure Committee of the Board of
Directors.
(1) Based on 21,628,730 shares of common stock issued and outstanding on
November 1, 1996, excluding, except as otherwise noted, shares of common
stock issuable upon the exercise of outstanding stock options.
(2) Based on Corporate Record received from NASDAQ Stock Market reflecting data
as of September 1996 with filing date of June 1996.
(3) Includes 769,250 shares issuable upon the exercise of stock options that
were exercisable at or within 60 days after November 1, 1996. Does not
include 350,000 shares issuable upon the exercise of options that were not
exercisable at or within 60 days after November 1, 1996.
(4) Includes 218,750 shares issuable upon the exercise of stock options that
were exercisable at or within 60 days after November 1, 1996. Does not
include 31,250 shares issuable upon the exercise of options that were not
exercisable at or within 60 days after November 1, 1996.
(5) Consists solely of shares issuable upon the exercise of stock options that
were exercisable at or within 60 days after November 1, 1996.
(6) Does not include 22,500 shares issuable upon the exercise of stock options
that were not exercisable at or within 60 days after November 1, 1996.
(7) Includes 17,000 shares issuable upon the exercise of stock options that were
exercisable at or within 60 days after November 1, 1996.
-2-
<PAGE>
(8) Does not include 6,000 shares issuable upon the exercise of stock options
that were not exercisable at or within 60 days after November 1, 1996.
(9) Does not include 10,000 shares issuable upon the exercise of stock options
that were not exercisable at or within 60 days after November 1, 1996.
(10) Includes 22,000 shares issuable upon the exercise of stock options that
were exercisable at or within 60 days after November 1, 1996.
(11) Includes 1,070,500 shares issuable upon the exercise of stock options that
were exercisable at or within 60 days after November 1, 1996. Does not
include 437,750 shares issuable upon the exercise of stock options that
were not exercisable at or within 60 days after November 1, 1996.
-3-
<PAGE>
BACKGROUND OF NOMINEES AND EXECUTIVE OFFICERS
Kobi Alexander. Mr. Alexander has served as Chairman of the Board of
--------------
Directors of the Corporation since September 1986, as President and Chief
Executive Officer since April 1987 and as a director of the Corporation since
its formation. Mr. Alexander also served as Co-Managing Director of the
Corporation's wholly-owned Israeli subsidiary, Efrat Future Technology Ltd.
("Efrat") from its formation in 1982 until October 1986, and currently serves as
Chairman of the Board of Directors of Efrat. From October 1984 to September
1986, Mr. Alexander served as Co-Chairman and Co-Chief Executive Officer of the
Corporation. Prior to the formation of Efrat, in 1980 and 1981, Mr. Alexander
served as an independent financial and business consultant to a number of
multinational corporations. Between 1978 and 1980, Mr. Alexander worked in the
Corporate Finance Department of Shearson Loeb Rhoades (currently Smith Barney).
Mr. Alexander received a B.A., magna cum laude, in Economics from the Hebrew
University of Jerusalem in 1977, and an M.B.A. in Finance from New York
University in 1980. He has served as the Chairman of the High-Tech Research and
Development Section of the Israeli Association of Industrialists.
Carmel Vernia. Mr. Vernia serves as Chief Operating Officer of the
-------------
Corporation and as Managing Director of Efrat, where he has been employed since
1984 in various capacities, including Vice President, Manager of the Government
Systems Division and Manager of the Research and Development Division. Prior to
joining Efrat, he was employed by Elco Ltd. in Israel, where he headed the
development of advanced perimeter intrusion detection systems. Between 1980 and
1982, Mr. Vernia was employed by Intel Corporation in Santa Clara, California,
where he served as applications engineer for digital signal processing, digital
telephony and data communications products. He received a B.Sc. in Electrical
Engineering from the Technion, Israel Institute of Technology, in 1974 and a
M.Sc. in Electrical and Computer Engineering from the University of California
at Davis in 1980.
Igal Nissim. Mr. Nissim has been employed by the Corporation since May 1986
-----------
and has served as Chief Financial Officer of the Corporation since January 1993.
He previously served as Chief Financial Officer of Efrat. Prior to joining the
Corporation, he was employed by Gadot Industrial Enterprises Ltd. for a period
of two years as deputy controller, responsible for financial and cost
accounting. Mr. Nissim is a Certified Public Accountant in Israel and was
employed for four years with Kesselman & Kesselman, one of the largest
accounting firms in Israel. He received a B.A. in Economics and Accounting from
Tel Aviv University in 1981.
Zvi Alexander. Mr. Alexander has been a director of the Corporation since
-------------
August 1989. Mr. Alexander has been actively engaged in the energy industry for
more than 30 years. He served as Chief Executive Officer of the Israeli
National Oil Company and its successor from 1966 through 1976, and subsequently
engaged in activities in the energy industry as a consultant and independent
entrepreneur. He is currently Chairman of A&T Exploration Company Ltd. Zvi
Alexander is the father of Kobi Alexander and the father-in-law of Yechiam
Yemini.
John H. Friedman. Mr. Friedman has been a director of the Corporation since
----------------
June 1994. He is the Managing Director of Easton Capital Corporation, a
private investment firm founded by Mr. Friedman in 1991. From 1989 to 1991, Mr.
Friedman was a Managing Director of Security Pacific Capital Investors. Prior
to joining that firm, he was a Managing Director of E. M. Warburg, Pincus & Co.,
Inc., where he was employed from 1981 to 1989. From 1978 to 1980, Mr. Friedman
practiced law with the firm of Sullivan & Cromwell in New York City. Mr.
Friedman received a B.A., magna cum laude, from Yale University and a J.D. from
Yale Law School.
Sam Oolie. Mr. Oolie has been a director of the Corporation since May 1986.
---------
He has been Chairman and Chief Executive Officer of NoFire Technologies, Inc., a
manufacturer of high performance fire retardant products, since August 1995. He
has also been Chairman of Oolie Enterprises, an investment company, since July
1985. He also has served as a director of CFC Associates, a venture capital
firm, since January 1984. He was Chairman of The Nostalgia Network, a cable
television network, from April 1987 to January 1990 and was Vice Chairman and
director of American Mobile Communications, Inc., a cellular telephone company,
from February 1987 to July 1989. From February 1962 to July 1985, Mr. Oolie was
Chairman, Chief Executive Officer and a director of Food Concepts, Inc., a
provider of food services to institutions and hospitals. Mr. Oolie also serves
as a director of
-4-
<PAGE>
Avesis, Inc., NoFire Technologies, Inc., and Noise Cancellation
Technologies, Inc. Mr. Oolie received a B.S. from Massachusetts Institute of
Technology in 1958 and an M.B.A. from Harvard Business School in 1961.
William F. Sorin. Mr. Sorin, who has served as a director and the Corporate
----------------
Secretary of the Corporation since its formation, is an attorney engaged in
private practice and is general counsel to the Corporation. Mr. Sorin received
a B.A. from Trinity College in 1970 and a J.D., cum laude, from Harvard Law
School in 1973.
Yechiam Yemini. Professor Yemini, a director of the Corporation from October
--------------
1984 to May 1986 and since May 1987, has been Chief Scientific Advisor to the
Corporation since its formation. He has been a professor in the computer
science department of Columbia University since 1980, where he is leading
research projects in the areas of distributed computing and communications and
network management systems. Professor Yemini received a Ph.D. in Computer
Science from UCLA in 1978 in the area of computer networking. Professor Yemini
is the brother-in-law of Kobi Alexander and the son-in-law of Zvi Alexander.
COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors has four standing committees. The Executive
Committee is empowered to exercise the full authority of the Board of Directors
in circumstances when convening the full board is not practicable. The Audit
Committee is responsible for reviewing audit procedures and supervising the
relationship between the Corporation and its independent auditors. The
Remuneration and Stock Option Committee is responsible for approving
compensation arrangements for senior management of the Corporation and
administering the Corporation's stock option plans. The Corporate Planning and
Structure Committee reviews and makes recommendations to the board concerning
issues of corporate structure and planning, including the formation and
capitalization of subsidiaries of the Corporation, the structure of acquisition
transactions, the terms of any stock options and other compensation arrangements
in respect of subsidiaries of the Corporation, situations that might involve
conflicts of interest relative to the Corporation and its subsidiaries and the
terms of significant transactions between the Corporation and its subsidiaries.
During 1995, there were four meetings of the Board of Directors of the
Corporation, six written actions in lieu of meetings of the Remuneration and
Stock Option Committee, two meetings of the Audit Committee and one meeting of
the Corporate Planning and Structure Committee. Each member of the Board of
Directors attended all the meetings of the Board of Directors and of each
Committee of which he was a member during the year.
-5-
<PAGE>
EXECUTIVE COMPENSATION
The following table presents summary information regarding the compensation
paid or accrued by the Corporation for services rendered during the years 1993,
1994 and 1995 by those of its executive officers whose salary and bonus
compensation during 1995 exceeded $100,000:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION STOCK
NAME AND -------------------------- OPTION ALL OTHER
PRINCIPAL POSITION YEAR SALARY(1) BONUS(2) GRANTS(3) COMPENSATION(4)
- ---------------------------- ---- --------- --------- --------- ---------------
<S> <C> <C> <C> <C> <C>
Kobi Alexander 1995 $342,950 $526,845 - $324,454
President, Chief Executive 1994 $348,643 $364,020 500,000 $102,877
Officer and Chairman of 1993 $339,683 $425,000 - $238,247
the Board of Directors
Carmel Vernia 1995 $130,394 $100,000 - $ 29,921
Chief Operating Officer(5) 1994 $121,436 $100,000 200,000 $ 30,973
Managing Director, Efrat 1993 $100,513 $ 40,000 25,000 $ 23,065
Igal Nissim 1995 $ 98,988 $ 15,000 10,000 -
Chief Financial Officer 1994 $101,480 $ 17,500 10,000 -
1993 $ 90,000 $ 15,000 10,000 -
</TABLE>
- -------------------
(1) Includes salary and payments in lieu of earned vacation.
(2) Includes bonuses accrued for services performed in the year indicated,
regardless of the year of payment.
(3) See also "Options to Purchase Subsidiary Shares."
(4) Consists of miscellaneous items not exceeding $10,000 in the aggregate for
any individual, premium payments and contributions under executive
insurance and training plans and, in the case of Mr. Alexander, $281,000,
$60,000 and $211,000 accrued in 1995, 1994 and 1993, respectively, for
payments due on termination of employment pursuant to the terms of his
employment agreements with the Corporation.
(5) Mr. Vernia was appointed Chief Operating Officer of the Corporation
effective January 1, 1994.
The following table sets forth information concerning options granted during
1995 to the executive officers of the Corporation under its employee stock
option plans:
-6-
<PAGE>
STOCK OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE
ASSUMED ANNUAL RATES OF
STOCK PRICE APPRECIATION
INDIVIDUAL GRANTS FOR OPTION TERM*
- ------------------------------------------------------------------------------------------
PERCENT OF
TOTAL
OPTIONS
NUMBER OF GRANTED TO EXERCISE
SHARES EMPLOYEES PRICE
SUBJECT TO IN FISCAL PER EXPIRATION
NAME OPTION YEAR SHARE DATE 5% 10%
- ------------- ---------- ---------- -------- ----------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Igal Nissim 10,000 1.5% $13.50 May 25, 2005 $84,901 $215,155
</TABLE>
- ------------------------
* Represents the gain that would be realized if the option were held for its
entire ten-year term and the value of the underlying shares increased at
compounded annual rates of 5% and 10% from the fair market value at the
date of option grant.
The above option has a term of ten years and becomes exercisable and vests
in annual increments over four years from the year of grant. The exercise price
of the option is equal to the fair market value of the underlying shares at the
date of grant.
The following table sets forth certain information concerning options
granted during the past three fiscal years to the above-named executive officers
of the Corporation under its employee stock option plans:
STOCK OPTION GRANTS IN LAST THREE FISCAL YEARS
<TABLE>
<CAPTION>
PERCENT OF
TOTAL
OPTIONS
NUMBER OF GRANTED TO EXERCISE
SHARES EMPLOYEES PRICE
YEAR OF SUBJECT TO IN FISCAL PER EXPIRATION
GRANT NAME OPTION YEAR SHARE DATE
- --------- -------------- ---------- ---------- ------- ------------------
<S> <C> <C> <C> <C> <C>
1995:
Kobi Alexander - - - -
Carmel Vernia - - - -
Igal Nissim 10,000 1.5% $ 13.50 May 25, 2005
1994:
Kobi Alexander 500,000 42.5% $ 10.00 September 22, 2004
Carmel Vernia 200,000 17.0% $ 10.00 September 22, 2004
Igal Nissim 10,000 0.9% $ 10.00 September 22, 2004
1993:
Kobi Alexander - - - -
Carmel Vernia 25,000 6.1% $13.375 September 15, 2003
Igal Nissim 10,000 2.4% $13.375 September 15, 2003
</TABLE>
-7-
<PAGE>
The following table sets forth, as to each executive officer identified
above, the shares acquired on exercise of options and the value realized during
1995, the number of unexercised options held at December 31, 1995, currently
exercisable and subject to future vesting, and the value of such options based
on the closing price of the underlying shares on the NASDAQ National Market
System at that date, net of the associated exercise price.
OPTION EXERCISES AND YEAR-END VALUE TABLE
AGGREGATE OPTION EXERCISES IN 1995 AND
VALUE OF UNEXERCISED OPTIONS AT DECEMBER 31, 1995
<TABLE>
<CAPTION>
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED
SHARES OPTIONS HELD IN-THE-MONEY OPTIONS
ACQUIRED AT DECEMBER 31, 1995 HELD AT DECEMBER 31, 1995
ON VALUE -------------------------- ---------------------------------
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---------------- -------- -------- ----------- ------------- ----------- --------------------
<S> <C> <C> <C> <C> <C> <C>
Kobi Alexander 44,500 $826,031 519,250 500,000 $9,113,425 $5,000,000
Carmel Vernia 10,000 $183,035 202,500 62,500 $2,281,000 $ 582,500
Igal Nissim - - 7,000 25,000 $ 68,600 $ 198,000
</TABLE>
See "Options to Purchase Subsidiary Shares" for information regarding the
grant to certain executive officers of options to purchase shares of
subsidiaries of the Corporation.
EMPLOYMENT AGREEMENTS
Mr. Alexander serves as Chairman of the Board, President and Chief Executive
Officer of the Corporation under an agreement extending through June 30, 2000 at
a current base annual salary of $308,300. Pursuant to the agreement, Mr.
Alexander received bonus compensation of $526,845 for services rendered during
1995 and is entitled to receive bonus compensation in 1996 and succeeding years
in an amount to be negotiated annually, but not less than 3% of the
Corporation's consolidated after tax net income in each year. Mr. Alexander
also receives various supplemental medical, insurance and other personal
benefits from the Corporation under the terms of his employment, including the
use of an automobile leased by the Corporation.
Upon the termination of his employment with the Corporation for any reason,
Mr. Alexander is entitled to receive a severance payment in an amount equal to
$77,000 times the number of years (plus any partial years) of his employment by
the Corporation commencing with 1983, increased by 10% per annum starting in
December 1996, plus continued employment-related benefits for the period of 36
months following termination. In the event that Mr. Alexander's employment is
terminated by the Corporation without cause, by Mr. Alexander as a result of a
material breach by the Corporation of its obligations under the agreement or by
his resignation within the period of six months following a change in control of
the Corporation, Mr. Alexander is entitled to an additional severance payment
equal to 299% of the average annual cash compensation (including salary and any
bonus payments) received by him from the Corporation during the most recent
three fiscal years plus an amount equal to the income tax liability to Mr.
Alexander resulting from such payment. The agreement also requires the
Corporation to grant to Mr. Alexander an option to purchase up to 7.5% of the
shares of each subsidiary of the Corporation, other than Efrat, for a price
equal to the greater of the fair market value or the book value of such shares
at the date of option grant.
Mr. Alexander serves as Chairman of the Board of Efrat under an agreement
that extends through July 31, 1997 at a current basic salary (the "Basic
Salary") of $3,500 per month. Efrat has also agreed to reimburse Mr. Alexander
for certain business-related expenses, to provide him with the use of a company-
owned automobile and to pay certain amounts for his account into defined
contribution insurance and training funds in Israel. In addition, if Mr.
Alexander conducts business activities abroad, including in the United States,
Efrat is required to bear his
-8-
<PAGE>
reasonable lodging and living expenses, which shall in any event be not less
than the per diem allowance customarily provided to senior executive managers of
Israeli companies, and if the period of his stay abroad is in excess of eight
weeks, his Basic Salary during such period shall be increased to an amount which
will support a standard of living comparable to that provided in Israel by the
Basic Salary and other benefits afforded under the agreement. Efrat is also
required to pay any taxes incurred by Mr. Alexander in respect of benefits
provided to him under the agreement and certain professional fees incurred for
the benefit of Mr. Alexander. In the event that Efrat unilaterally terminates or
fundamentally breaches the agreement, it must pay, as liquidated damages, an
amount equal to the Basic Salary due for the remainder of the term of the
agreement plus an amount equal to the present value of all non-monetary benefits
under the agreement. The present value of the non-monetary benefits under the
agreement is not readily determinable but is estimated at approximately 25% of
such salary.
Mr. Vernia is employed as Managing Director of Efrat and Chief Operating
Officer of the Corporation under an agreement providing for a base monthly
salary at a current rate of 34,325 Israeli shekels, subject to Israeli statutory
cost of living adjustment (resulting in a current annual salary equal to
approximately $126,000) and an annual bonus in an amount to be determined. The
agreement may be terminated by either party only with prior notice of at least
one year. Mr. Vernia is entitled under the agreement to receive various
insurance and supplemental benefits and the use of an automobile owned or leased
by Efrat. Mr. Vernia has also been granted options to purchase between 2.5% and
3.75% of the shares of certain subsidiaries of the Corporation for a price equal
to the greater of the fair market value or the book value of such shares at the
date of option grant. Mr. Nissim receives a base annual salary from the
Corporation of 25,891 Israeli shekels, subject to Israeli statutory cost of
living adjustment (resulting in a current annual salary equal to approximately
$95,000) and incidental benefits, including the use of an automobile owned by
the Corporation.
COMPENSATION OF DIRECTORS
Each director who is not an employee of the Corporation or otherwise
compensated by the Corporation for services rendered in another capacity, and
whose position on the Board of Directors is not attributable to any contract
between the Corporation and such director or any other entity with which such
director is affiliated, receives compensation in the amount of $2,250 for each
meeting of the Board of Directors and of certain committees of the Board of
Directors attended by him during the year. Each of such eligible directors is
also entitled to receive an annual stock option grant under the Corporation's
Stock Option Plans entitling him to purchase 6,000 shares of common stock at a
price per share equal to the fair market value of the common stock as reported
on the NASDAQ System on the date two business days after the publication of the
audited year-end financial statements of the Corporation. Such options are
subject to forfeiture to the extent of 1,200 shares per meeting in the event
that the option holder, during the year of grant, fails to attend at least five
meetings of the Board of Directors and any of its committees of which the option
holder is a member. Each director who resides outside of the United States and
is not an officer or employee of the Corporation is entitled to reimbursement of
expenses incurred for attendance at meetings of the Board, up to the amount of
$2,000 for each meeting attended.
OPTIONS TO PURCHASE SUBSIDIARY SHARES
The Corporation has granted to certain key executives options to acquire
shares of certain subsidiaries, other than Efrat, as a means of providing
incentives directly tied to the performance of those subsidiaries for which
different executives have direct responsibility. Such options have been granted
to executive officers of the Corporation as set forth under "Employment
Agreements". Options have been granted to other key employees which, upon
exercise, would represent in the aggregate between approximately 2.5% and
approximately 20% (subject in certain instances to antidilution adjustment) of
the outstanding shares of the relevant subsidiaries. In general, these options
have terms of up to ten years, become exercisable and vest in equal ratable
annual increments over periods ranging from three to five years from the first
anniversary of the date of initial grant, and have exercise prices equal to the
higher of the book value of the underlying shares at the date of grant or the
fair market value of such shares at that date determined on the basis of an
arms'-length transaction with a third party or, if no such transactions have
occurred, on a reasonable basis as determined by the Board of Directors. Upon
the exercise, in whole or in part, of any option, Comverse will receive an
irrevocable proxy to vote the underlying shares and a right
-9-
<PAGE>
of first refusal to purchase the shares upon any proposed sale, transfer or
other disposition, until such time as the shares shall have been sold in a bona
fide open market transaction.
These options (and any shares received by the holders upon exercise)
provide the option holders with a potentially larger equity interest in the
respective subsidiaries than in the Corporation, which, under certain
circumstances, could cause the option holders' interests to conflict with those
of the Corporation's shareholders generally.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Corporation paid William F. Sorin, a director of the Corporation, an
aggregate of approximately $298,000 for legal services rendered to the
Corporation during the year ended December 31, 1995.
-10-
<PAGE>
REPORT OF THE REMUNERATION AND STOCK OPTION COMMITTEE
CONCERNING EXECUTIVE COMPENSATION
The Board of Directors believes that an essential element of the
Corporation's continued success will be its ability to provide compensation
arrangements that enable it to attract, motivate and retain executive officers
who are capable of developing and executing the Corporation's short-term and
long-term business plans. The Remuneration and Stock Option Committee of the
Board of Directors (the "Committee") has the primary responsibility for
establishing compensation levels for senior management and administering the
Corporation's stock option plans.
The principal components of the Corporation's executive compensation
arrangements are base salary, cash bonus awards and stock options. Compensation
arrangements for senior management personnel in certain instances include a
performance-based component as well as discretionary bonus awards. With the
exception of the employment agreements with Messrs. Alexander and Vernia
described in this Proxy Statement, no agreement, plan or arrangement is in
effect between the Corporation and any executive officer that is not terminable
by the Corporation without liability on notice of 270 days or less.
Salary levels throughout the organization are reviewed annually, and are
adjusted periodically when the Corporation believes that adjustment is required,
taking into account competitive factors in the industries and locations of the
Corporation's activities. In establishing compensation levels throughout the
organization, the Corporation relies to a significant extent on its direct
experience in the recruitment of personnel as well as reported compensation
levels of senior management of other publicly-held companies. Supplemental cash
bonus awards are made periodically to reflect superior performance by individual
employees, in accordance with recommendations by senior management, and in
certain instances in accordance with formulas based on the profitability of the
Corporation or its individual business units.
Historically, employees of the Corporation have benefited from the
Corporation's practice of awarding stock options to personnel throughout the
organization, and the resulting value associated with the increase in the market
price of the Corporation's shares in recent years. The Board of Directors
believes that equity-based incentive arrangements, such as employee stock
options, are among the most effective means available to the Corporation of
aligning the interests of employees with the objectives of shareholders
generally, and of building their long-term commitment to the organization. The
Corporation emphasizes stock option awards as an essential element of the
remuneration package available to its executives and employees. Stock options
typically vest in annual increments over periods of three or four years to
encourage long-term commitment to the Corporation by the grantees.
The Corporation has also adopted the practice of awarding to key executives
options entitling them to acquire shares of certain of the Corporation's
subsidiaries, as a means of providing incentives directly tied to the
performance of those business units for which different executives have direct
responsibility. (See "Options to Purchase Subsidiary Shares"). These options
(and any shares received by the holders upon exercise) provide the option
holders with a potentially larger equity interest in the respective subsidiaries
than in the Corporation, which, under certain circumstances, could cause the
option holders' interests to conflict with those of the Corporation's
shareholders generally. However, the Committee believes that the potential for
conflict is outweighed by the benefits derived by the Corporation from the use
of these option arrangements as an incentive to key personnel.
The Corporation considers both available competitive data and subjective
performance evaluations in determining the number of options to grant to its
officers and key employees. During 1995, grants of options to purchase an
aggregate of 650,200 shares of Common Stock were made to all employees,
including options to purchase an aggregate of 10,000 shares awarded to executive
officers of the Corporation. Options granted to executive officers during 1995
vest in increments over periods of up to four years from the date of grant.
-11-
<PAGE>
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER
Mr. Alexander has served as President and Chief Executive Officer of the
Corporation since 1987 under agreements providing for fixed annual salary, bonus
compensation and employment-related benefits. The terms of Mr. Alexander's
employment agreements, as currently in effect, are described above.
The terms of Mr. Alexander's employment, as set forth in his agreements with
the Corporation, have been established by direct negotiation between Mr.
Alexander and the Committee. In approving such terms, the Committee has taken
into account the growth in the Corporation's business, and particularly the
increase in its net income, throughout the period that Mr. Alexander has served
as Chief Executive Officer, and compensation levels of chief executive officers
of other publicly-held companies.
In this regard, the Committee has taken note of the significant growth in the
Corporation's annual revenues, net income, stockholder's equity and assets over
the past five years, under Mr. Alexander's leadership as Chief Executive
Officer, as shown in the following table:
<TABLE>
<CAPTION>
DOLLARS IN THOUSANDS COMPOUNDED
1991 1992 1993 1994 1995 RATE OF GROWTH
<S> <C> <C> <C> <C> <C> <C>
Total Revenues $35,986 $51,904 $ 84,591 $114,312 $145,896 42%
Net Income $ 2,407 $ 5,860 $ 13,465 $ 12,098 $ 17,050 63%
Net Income Per Share $ 0.16 $ 0.36 $ 0.65 $ 0.55 $ 0.75 47%
Stockholders' Equity $15,813 $32,576 $ 91,608 $101,613 $121,766 67%
Total Assets $26,853 $55,245 $174,468 $192,502 $221,454 69%
</TABLE>
THE REMUNERATION AND STOCK OPTION COMMITTEE
John H. Friedman, Chairman
Sam Oolie
Yechiam Yemini
-12-
<PAGE>
STOCK PERFORMANCE GRAPH
The following table compares the five year cumulative return on a
hypothetical investment in Comverse Technology, Inc. (CMVT), the S&P 500 Index
and the S&P High Tech Composite Index, assuming an investment of $100 on
December 31, 1990 and the reinvestment of any dividends.
[GRAPH APPEARS HERE]
Indexed Returns
Years Ending
<TABLE>
<CAPTION>
COMPANY/INDEX DEC. 90 DEC. 91 DEC. 92 DEC. 93 DEC. 94 DEC. 95
- ------------------------------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
COMVERSE TECHNOLOGY, INC. 100 300.53 919.25 748.66 635.03 1069.52
S&P 500 Index 100 130.47 140.41 154.56 156.60 215.45
S&P High Tech Composite Index 100 114.08 118.79 146.13 170.31 245.32
</TABLE>
-13-
<PAGE>
PROPOSALS TO BE ACTED UPON AT THE ANNUAL MEETING
ELECTION OF DIRECTORS
It is the intention of the Board of Directors to nominate for election to the
Board of Directors at the Annual Meeting each of the individuals named below, to
serve until the next Annual Meeting of Shareholders or their earlier resignation
or removal. In the event that any of such nominees should become unwilling or
unable to stand for election at the Annual Meeting for any reason, at present
unknown, it is intended that votes will be cast pursuant to the accompanying
proxy for such substitute nominee or nominees as the Board of Directors may
designate.
Kobi Alexander
Zvi Alexander
John H. Friedman
Sam Oolie
William F. Sorin
Yechiam Yemini
The election of directors will be made by plurality of votes cast at the
Annual Meeting, with the six nominees receiving the greatest number of votes
being elected. THE BOARD OF DIRECTORS RECOMMENDS THE ELECTION AT THE ANNUAL
MEETING OF THE SIX INDIVIDUALS NAMED ABOVE.
ADOPTION OF 1996 STOCK OPTION PLAN
The Board of Directors intends to present at the Annual Meeting a proposal to
approve the adoption of the Corporation's 1996 Stock Option Plan (the "1996
Plan") and to reserve an aggregate of 1,000,000 shares of Common Stock for
future issuance thereunder.
The Board of Directors adopted the 1996 Plan on October 31, 1996, subject to
its approval by the shareholders of the Corporation at the Annual Meeting. A
copy of the 1996 Plan appears as an appendix to this Proxy Statement.
The Board of Directors believes that stock options have proven to be a highly
useful and economical means for the Corporation to attract and retain qualified
employees. By affording participating employees the opportunity to share in the
growth and appreciation in the value of the Corporation, such options provide an
incentive for employees to devote their maximum efforts to the success of the
Corporation. The Board of Directors further believes that the use of stock
options as a means of compensating participating employees has enabled the
Corporation to attract and retain highly qualified personnel with a smaller out-
of-pocket cost than would otherwise be necessary, permitting the Corporation to
preserve cash needed for the expansion of its operations. The shares reserved
for issuance under the Corporation's prior stock option plans have been
substantially depleted. The proposed 1996 Plan will increase the number of
shares of Common Stock available for issuance under employee stock options and
will enable the Corporation to continue to provide the incentive of equity
ownership to current and future employees on a basis consistent with the past
practices of the Corporation and of other companies in the high-technology
industries.
The Corporation adopted its prior stock option plans in 1984, 1987, 1994 and
1995 (the "1995 Plan"). The 1996 Plan is identical in all material respects to
the terms of the 1995 Plan. Pursuant to the provisions of all of the
Corporation's currently effective stock options plans (collectively, the "Option
Plans"), employees of the Corporation or any of its subsidiaries (including
officers, whether or not they are members of the Board of Directors) and others
rendering services to the Corporation, are eligible to be granted options to
purchase Common Stock. Each of the Option Plans has a ten year term, subject to
earlier termination by the Board of Directors. There are currently
approximately 1,200 employees of the Corporation and its subsidiaries eligible
to receive options under the Option Plans.
-14-
<PAGE>
Options may be granted under the Option Plans as "incentive stock options"
within the meaning of Section 422 of the Internal Revenue Code of 1986, as
amended (the "Code"). The exercise price of such options may not be less than
100% of the fair market value of the Common Stock on the date of grant and the
term of any such option may not exceed ten years. With respect to any employee
who directly and by attribution owns stock possessing more than 10% of the
voting power of the outstanding capital stock of the Corporation or any of its
subsidiaries, the exercise price of any incentive stock option must be at least
equal to 110% of the fair market value of such shares at the time of grant, and
the term may not exceed five years. The aggregate fair market value (determined
at the date of grant) of the Common Stock with respect to which incentive stock
options are exercisable for the first time by an employee during any particular
calendar year shall not exceed $100,000. Options granted under the Option Plans
which are not intended to qualify as incentive stock options may be granted at
an exercise price determined without regard to the fair market value of the
underlying shares (but not less than the par value thereof) and without
limitation as to amount.
Options granted under the Option Plans are not transferable (except by the
laws of descent and distribution) and, with certain exceptions, may be exercised
by the optionee only during the period of his or her employment or within three
months after termination of employment. Any shares subject to options that
expire or otherwise terminate without having been exercised in full are
available for future grant under the Option Plans. Subject to certain
exceptions, options typically vest incrementally over periods of three or four
years from the date of grant or of the commencement of the optionee's employment
with the Corporation or any of its subsidiaries.
The Option Plans provide for the annual grant to each director who is not an
employee of or otherwise compensated in any capacity by the Corporation, and
whose membership on the Board of Directors is not attributed to any contract
between the Corporation and such director or any other entity with which such
director is affiliated, of options to purchase an aggregate of 6,000 shares of
Common Stock with an exercise price equal to the fair market value of the Common
Stock as reported on the NASDAQ system on the date two business days after the
publication of the audited year-end financial statements of the Corporation.
Such options are subject to forfeiture to the extent of 1,200 shares per meeting
in the event that the option holder, during the year of grant, fails to attend
at least five meetings of the Board of Directors and any of its committees of
which the option holder is a member. The options have terms of ten years under
the 1995 and 1996 Plan and five years under the prior Option Plans.
Subject to certain restrictions, the Board of Directors, or any committee to
which the Board may delegate its authority (the "Option Committee"), is
authorized to designate the recipients of options under the Option Plans, the
number of shares to be covered by each option, the period during which each
option may be exercised, the method of payment and other terms and conditions of
the options. There is no established formula for determining the persons to
whom options will be granted, the number of shares subject to an option or
additional terms and conditions with respect thereto. In making any such
determination, the Board or Option Committee may take into account the nature of
the services rendered by the grantee, his or her present or potential
contributions to the Corporation and such other factors as the Board or the
Option Committee shall deem relevant.
The Board of Directors has the power to terminate or to amend the Option
Plans from time to time in such respects as it deems advisable, except that
approval by the Corporation's shareholders is required in respect of any
amendment which would (i) increase the total number of shares of Common Stock
which may be issued and sold pursuant to options granted under the Option Plans,
(ii) change the designation or the class of employees or other persons eligible
to receive options, (iii) decrease the minimum option prices as stated in the
Option Plans or (iv) extend the period during which an option may be granted or
exercised beyond the maximum period specified in the Option Plans. Except to
the extent necessary to govern outstanding options, each Option Plan will
terminate ten years from the date of its initial adoption by the Board of
Directors, and no additional options may be granted thereafter.
The Corporation believes that, under the applicable provisions of the Code
and the regulations of the United States Treasury Department currently in
effect, a grantee will not incur any United States Federal income tax upon the
grant of an option which is an incentive stock option. In addition, if the
grantee has been an employee of the Corporation or any of its subsidiaries from
the date of grant to the date three months prior to the date of exercise, the
grantee will not incur any Federal income tax upon the exercise of such option.
If the grantee does not dispose
-15-
<PAGE>
of shares acquired upon exercise of such option within one year after the
issuance of such shares or within two years from the date of grant of the option
(the "Holding Period"), then the difference, if any, between the exercise price
and the amount realized on a sale of the shares after such Holding Period will
generally be treated as capital gain or capital loss, as the case may be,
provided the shares are a capital asset in the hands of the grantee. In such
case, the employer corporation will not be entitled to a compensation deduction
for Federal income tax purposes either upon the grant or exercise of the option
or upon disposition of the shares.
For purposes of the alternative minimum tax, the excess, if any, over the
exercise price of an incentive stock option of the fair market value of the
shares as of the date (on or after the time of exercise) on which the shares
become transferable or not subject to a substantial risk of forfeiture will be
included in alternative minimum taxable income for the year of exercise or for
the year in which the shares become transferable or not subject to a substantial
risk of forfeiture (see discussion of "Restricted Shares", below). For this
purpose, the fair market value is determined without regard to any restriction
other than a restriction which, by its terms, will never lapse (the fair market
value as so determined is referred to herein as the "Market Value"). In
determining the amount of gain or loss on the sale of shares acquired upon
exercise of an option which qualifies as an incentive stock option for purposes
of the alternative minimum tax, the basis of such shares is increased by the
amount included in alternative minimum taxable income with respect to exercise
of the option. If the shares are disposed of in the same taxable year as
exercise in a sale or exchange with respect to which a loss (if sustained) would
be recognized, the amount included in alternative minimum taxable income of the
grantee is limited to the excess (if any) of the amount realized on the sale or
exchange over the exercise price.
If the grantee disposes of the shares during the Holding Period (a
"Disqualifying Disposition"), the excess, if any, of the Market Value of the
shares on the date the option was exercised (or on the date on which the Common
Stock became transferable or not subject to a substantial risk of forfeiture)
over the exercise price will be includable in the grantee's gross income as
ordinary income in the year of disposition. Any remaining gain will generally
be capital gain, provided the shares are capital assets in the hands of the
grantee. The employer corporation will be entitled to a deduction in the year
of a Disqualifying Disposition in an amount equal to the amount included in the
income of the grantee as ordinary income. In the case of a Disqualifying
Disposition, where the disposition is a sale or exchange with respect to which a
loss (if sustained) would be recognized, the amount of ordinary income of the
grantee, and the amount of the employer corporation's deduction, are limited to
the excess (if any) of the amount realized on the sale or exchange over the
exercise price.
Subject to the requirements described above, a grantee will not recognize
gain or loss upon the exercise of an incentive stock option, even if shares of
the Corporation's Common Stock are used in payment of all or part of the
exercise price. However, if the shares of Common Stock used in payment were
previously acquired by exercise of an incentive stock option and were not held
for the Holding Period when so applied, such application will be considered a
Disqualifying Disposition of the shares and will result in the recognition of
compensation income. If the exercise price of the option is paid solely in
shares, the basis of the shares of Common Stock acquired will be the basis of
the Common Stock used in payment, increased by the amount, if any, of
compensation income recognized upon exercise, provided that, to the extent that
the market value of the Common Stock acquired exceeds the market value of the
Common Stock used in payment, the basis of any shares of Common Stock acquired
in excess of the market value of Common Stock used in payment will be zero.
The Corporation believes that options granted under the Option Plans that are
not incentive stock options will not have a readily ascertainable fair market
value, as defined by Treasury Regulation Section 1.83-7. Therefore, a grantee
will not recognize income until shares are acquired upon the exercise of the
option. Upon exercise, the excess, if any, of the Market Value of the shares
acquired over the exercise price thereof will be recognized by the grantee as
compensation income. In the event shares received on the exercise of the option
are not transferable and are subject to a substantial risk of forfeiture as
defined in Code Section 83 ("Restricted Shares") the holder will not be taxable
until the shares become transferable or are no longer subject to such risk of
forfeiture and then will be taxable in an amount equal to the excess of the
Market Value of the shares as of such date over the exercise price. A grantee,
in such case, may elect under Code Section 83(b) to be taxed in the year in
which the Restricted Shares are received. So long as the sale of shares at a
profit could subject a person to suit under Section 16(b) of the Securities
Exchange Act of 1934, as amended, such person's rights in such shares are deemed
to be
-16-
<PAGE>
subject to a substantial risk of forfeiture and not transferable. The
grantee's tax basis will be an amount equal to the cash paid upon the exercise
of the option, increased by any amount includable in gross income of the
grantee. Upon a later disposition of shares received as a result of exercise of
the option, gain or loss will be measured by the difference between the sale
proceeds and such tax basis. The gain or loss will generally be treated as
capital gain or capital loss, provided the shares are capital assets in the
hands of the grantee.
If a grantee surrenders shares of Common Stock in payment of all or part of
the aggregate exercise price of an option which is not an incentive stock
option, the grantee will recognize compensation income if the Market Value of
the shares received exceeds the exercise price thereof. If the shares so
received are Restricted Shares, the rules regarding Restricted Shares discussed
above will apply. Additional considerations may apply if the shares surrendered
are subject to restrictions which may affect the value of such shares. If the
exercise price of the option is paid solely in shares, the grantee's aggregate
tax basis for the shares received will be the grantee's basis for the
surrendered shares plus the amount of compensation income recognized.
The employer corporation is generally entitled to a tax deduction in an
amount equal to the compensation income recognized by a grantee as a result of
the exercise of an option which is not an incentive stock option.
The proposal to approve the adoption of the 1996 Plan and to reserve an
aggregate of 1,000,000 shares of Common Stock for future issuance thereunder
requires the affirmative vote of the holders of a majority of the shares of
Common Stock present in person or represented by proxy at the Annual Meeting.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE IN FAVOR OF THE PROPOSAL.
RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
Shareholders will be requested at the Annual Meeting to ratify the selection
of Deloitte & Touche LLP to serve as independent auditors of the Corporation for
the year ending December 31, 1996. Deloitte & Touche LLP has served as the
Corporation's auditors since 1988. A representative of the firm is expected to
be present at the Annual Meeting, will have the opportunity to make a statement
and will be available to respond to appropriate questions. THE BOARD OF
DIRECTORS RECOMMENDS A VOTE FOR THE ADOPTION OF THE PROPOSAL.
-17-
<PAGE>
SHAREHOLDER PROPOSALS FOR 1996 ANNUAL MEETING
Any shareholder proposal intended to be presented at the next Annual Meeting
of Shareholders of the Corporation must be received by the Corporation by July
10, 1997 to be considered for inclusion in the Corporation's proxy solicitation
materials for such meeting.
OTHER BUSINESS
The Board of Directors does not know of any matter to be brought before the
Annual Meeting other than the matters specified in the Notice of Annual Meeting
accompanying this Proxy Statement. The persons named in the form of proxy
solicited by the Board of Directors will vote all proxies that have been
properly executed. If any matters not set forth in the Notice of Annual Meeting
are properly brought before the Annual Meeting, such persons will vote thereon
in accordance with their best judgment.
By Order of the Board of Directors,
William F. Sorin
Secretary
Woodbury, New York
November 6, 1996
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<PAGE>
COMVERSE TECHNOLOGY, INC.
1996 STOCK OPTION PLAN
1. Purpose.
-------
The purpose of this 1996 Stock Option Plan (the "Plan") is to induce key
personnel, including employees, directors, independent contractors, and other
persons rendering valued services, to remain in the employ or service of
Comverse Technology, Inc. (the "Company"), and its present and future subsidiary
corporations (each of which is hereinafter referred to as a "Subsidiary"), to
attract new personnel and to encourage such personnel to secure or increase on
reasonable terms their stock ownership in the Company. The Board of Directors
of the Company (the "Board") believes that the granting of options (the
"Options") under the Plan will promote continuity of management and increased
incentive and personal interest in the welfare of the Company by those who are
or may become primarily responsible for shaping and carrying out the long range
plans of the Company and securing its continued growth and financial success.
Options granted hereunder are intended to be either (a) "incentive stock
options" (which term, when used herein, shall have the meaning ascribed thereto
by the provisions of Section 422(b) of the Internal Revenue Code of 1986, as
amended (the "Code")) or (b) options which are not incentive stock options or
(c) a combination thereof, as determined by the Committee (the "Committee")
(referred to in Section 5 hereof) at the time of the grant thereof.
2. Effective Date of the Plan.
--------------------------
The Plan became effective on October 31, 1996, by resolution of the Board,
subject to ratification of the Plan by the vote of the holders of a majority of
the outstanding shares of the common stock, $0.10 par value, of the Company (the
"Common Stock") present in person or by proxy at the 1996 Annual Meeting of
Shareholders of the Company.
3. Stock Subject to Plan.
---------------------
1,000,000 of the authorized but unissued shares of the Common Stock are
hereby reserved for issue upon the exercise of Options; provided, however, that
the number of shares so reserved may from time to time be reduced to the extent
that a corresponding number of issued and outstanding shares of the Common Stock
are purchased by the Company and set aside for issue upon the exercise of
Options. If any Options expire or terminate for any reason without having been
exercised in full, the unpurchased shares subject thereto shall again be
available for the purposes of the Plan.
4. Administration.
--------------
The Plan shall be administered by the Committee referred to in Section 5
hereof. If a Committee shall not be so established, the Board shall perform the
duties and functions ascribed herein to the Committee. Subject to the express
provisions of the Plan, the Committee shall have complete authority, in its
discretion, to interpret the Plan, to prescribe, amend and rescind rules and
regulations relating to it, to determine the terms and provisions of the
respective option agreements (which need not be identical), to determine the
individuals (the "Participants") to whom and the times and the prices at which
Options shall be granted, to establish the option periods, the number of shares
of the Common Stock to be subject to each Option, whether each Option shall be
exercisable immediately or in installments and, if in installments, the time and
size thereof, whether each Option shall be an incentive stock option or an
Option which is not an incentive stock option, and to make all other
determinations necessary or advisable for the administration of the Plan. In
making such determinations, the Committee may take into account the nature of
the services rendered by the respective Participants, their present and
potential contributions to the success of the Company and the Subsidiaries and
such other factors as the Committee, in its discretion, shall deem relevant.
The Committee's determination on all of the matters referred to in this Section
4 shall be conclusive.
<PAGE>
5. Committee.
---------
The Committee shall consist of at least three individuals who may, but need
not, be members of the Board and all of whom shall be "disinterested persons"
within the meaning of Rule 16b-3(c)(2)(i) promulgated under the Securities
Exchange Act of 1934, as amended. The Committee shall be appointed by the
Board, which may at any time and from time to time remove any member of the
Committee, with or without cause, appoint additional members of the Committee
and fill vacancies, however caused, in the Committee. A majority of the members
of the Committee shall constitute a quorum. All determinations of the Committee
shall be made by a majority of its members. Any decision or determination of
the Committee reduced to writing and signed by all of the members of the
Committee shall be fully as effective as if it had been made at a meeting duly
called and held.
6. Eligibility.
-----------
A. An Option which is an incentive stock option may be granted only to key
employees of the Company or a Subsidiary.
B. An Option which is not an incentive stock option may be granted only to
key employees of the Company or a Subsidiary, independent contractors hired by
the Company or a Subsidiary and, upon the terms and subject to the conditions
set forth in paragraph C of this Section, members of the Board who are not
employees of the Company or a Subsidiary.
C. Each director of the Company who is not an employee of the Company or
any Subsidiary, who does not receive compensation from the Company or any
Subsidiary in any capacity other than as a director of the Company and whose
membership on the Board is not attributable to any contract between the Company
and such director or any other entity with which such director is affiliated,
shall receive in each fiscal year of the Company Options to purchase 6,000
shares of Common Stock having an option price per share equal to the fair market
value of a share of Common Stock determined (in accordance with Paragraph C of
Section 7) as of the date two business days after the publication of the audited
year-end financial statements of the Company for the immediately preceding
fiscal year, such Options to be forfeited to the extent of 1,200 shares per
meeting in the event that such director, during the year of grant, fails to
attend, in the aggregate, at least five meetings of the Board and any committees
of the Board of which such director is a member; provided, however, that during
the continuation of the Company's previously-adopted Stock Option Plans, options
granted thereunder shall be deemed to be granted under the Plan for the purposes
of this Section 6.
7. Option Prices.
-------------
A. The initial per share option price of any Option which is an incentive
stock option shall not be less than the fair market value of a share of the
Common Stock on the date of grant; provided, however, that, in the case of a
Participant who owns more than 10% of the total combined voting power of the
Common Stock at the time an incentive stock option is granted to him, the
initial per share option price shall not be less than 110% of the fair market
value of the Common Stock.
B. The initial per share option price of any Option which is not an
incentive stock option shall not be less than $0.10; provided, that the initial
per share option price of any Option granted to a member of the Board who is not
an employee of the Company or any Subsidiary shall be fixed in accordance with
paragraph C of Section 6.
C. For the purposes hereof, the fair market value of a share of the Common
Stock on any date shall be equal to the closing sale price of a share of the
Common Stock as published by a national securities exchange on which the shares
of the Common Stock are traded on such date or, if there is no sale of the
Common Stock on such date, the average of the bid and asked prices on such
exchange at the close of trading on such date or, if the shares of the Common
Stock are not listed on a national securities exchange on such date, the closing
price in the over the counter market, or if the Common Stock is not traded on a
national securities exchange or the over the counter market, the fair market
value of a share of the Common Stock on such date as shall be determined in good
faith by
-2-
<PAGE>
the Committee in compliance with Section 422(b)(4) of the Code and the
applicable regulations promulgated thereunder.
8. Option Term.
-----------
Participants shall be granted Options for such term as the Committee shall
determine, not in excess of ten years from the date of the granting thereof;
provided, however, that in the case of a Participant who owns more than 10% of
the total combined voting power of the Common Stock at the time an Option which
is an incentive stock option is granted to him, the term with respect to such
Option shall not be in excess of five years from the date of the granting
thereof.
9. Limitation on Amount of Incentive Stock Options Granted.
-------------------------------------------------------
The aggregate fair market value (determined at the date of grant) of the
shares of the Common Stock for which any Participant may be granted incentive
stock options which are exercisable for the first time in any calendar year
(whether under the terms of the Plan or any other stock option plan of the
Company) shall not exceed $100,000. To the extent that any Option which is
intended to be an incentive stock option fails to satisfy the requirements of
this Section, the Option shall be treated as an Option which is not an incentive
stock option. This Section shall be applied by taking Options into account in
the order in which they are granted.
10. Exercise of Options.
-------------------
A. Options granted to employees of and consultants to the Company or any
Subsidiary shall become exercisable at such times and in such installments as
the Committee shall determine at the time of the grant thereof. Options
received by directors other than employees of the Company or any Subsidiary
shall become exercisable on the first day of the fiscal year of the Company next
following the year in respect of which such Options are granted.
B. Except as hereinbefore otherwise set forth, an Option may be exercised
either in whole or in part at any time or from time to time.
C. An Option may be exercised only by a written notice of intent to
exercise such Option with respect to a specified number of shares of the Common
Stock and payment to the Company of the amount of the option price for the
number of shares of the Common Stock so specified; provided, however, that, if
the Committee shall in its sole discretion so determine at the time of the grant
of any Option, all or any portion of such payment may be made in kind by the
delivery of shares of the Common Stock having a fair market value, on the date
of delivery (as determined in the manner set forth in paragraph C of Section 7
hereof), equal to the portion of the option price so paid.
11. Transferability.
---------------
No Option shall be assignable or transferable except by will and/or by the
laws of descent and distribution and, during the life of any Participant, each
Option granted to him may be exercised only by him.
12. Termination of Employment.
-------------------------
A. Except as otherwise determined by the Committee, in the event a
Participant leaves the employ or service of the Company and the Subsidiaries for
any reason other than death, retirement or disability (as such term is defined
in section 22(e) of the Code), whether voluntarily or otherwise, each Option
theretofore granted to him which shall not have expired or otherwise been
canceled shall, to the extent it is exercisable on the date of such termination
of employment or service and to the extent it shall not have theretofore been
exercised or become unexercisable, terminate upon the earlier to occur of (i)
the expiration of a period of 90 days after such termination of employment or
service or (ii) the date specified in said Option.
-3-
<PAGE>
B. In the event a Participant's employment or service with the Company and
the Subsidiaries terminates by reason of his death, each Option theretofore
granted to him which shall not have expired or otherwise been canceled shall, to
the extent it is exercisable on the date of such Participant's death and to the
extent it shall not have theretofore been exercised or become unexercisable,
terminate upon the earlier to occur of (i) the expiration of a period of one
year after such Participant's death or (ii) the date specified in said Option.
C. In the event a Participant's employment or service with the Company and
the Subsidiaries terminates by reason of his retirement, whether voluntarily or
as may be required by any pension plan, or by reason of his disability (as such
term is defined in section 22(e) of the Code), each Option theretofore granted
to him which shall not have expired or otherwise been canceled shall become
immediately exercisable in full and shall, to the extent it shall not have
theretofore been exercised or become unexercisable, terminate upon the earlier
to occur of (i) the expiration of 90 days after the date of such Participant's
retirement or disability or (ii) the date specified in said Option.
D. The Committee or the Board may in its discretion extend the period
during which an Option held by any employee of or consultant to the Company or
any Subsidiary may be exercised to such period, not to exceed three years
following the termination of a Participant's employment or service with the
Company or any of the Subsidiaries, as the Committee or the Board may determine
to be appropriate in any particular instance.
13. Adjustment of Number of Shares.
------------------------------
A. In the event that a dividend shall be declared upon the Common Stock
payable in shares of the Common Stock, the number of shares of the Common Stock
then subject to any Option and the number of shares of the Common Stock reserved
for issuance in accordance with the provisions of the Plan but not yet covered
by an Option shall be adjusted by adding to each share the number of shares
which would be distributable thereon if such share had been outstanding on the
date fixed for determining the shareholders entitled to receive such stock
dividend. In the event that the outstanding shares of the Common Stock shall be
changed into or exchanged for a different number or kind of shares of stock or
other securities of the Company or of another corporation, whether through
reorganization, recapitalization, stock split-up, combination of shares, sale of
assets, merger or consolidation, then, there shall be substituted for each share
of the Common Stock then subject to any Option and for each share of the Common
Stock reserved for issuance in accordance with the provisions of the Plan but
not yet covered by an Option, the number and kind of shares of stock or other
securities into which each outstanding share of the Common Stock shall be so
changed or for which each such share shall be exchanged; provided, however,
that, in the event of a merger or consolidation in which the Company is not the
surviving corporation or of a sale by the Company of all or substantially all of
its assets to a corporation not controlled by the Company (within the meaning of
section 1563(a)(1) of the Code) immediately prior to such transaction, the Board
determines, in its discretion, that such change or exchange cannot be effected
or would be inappropriate, then, each Option theretofore granted to a
Participant which shall not have expired or otherwise been canceled shall become
immediately exercisable in full and shall terminate upon the later to occur of
(i) the expiration of 30 days following notice to the Participant by the Company
of such merger, consolidation or sale, or (ii) the date of such merger,
consolidation or sale.
B. In the event that there shall be any change, other than as specified in
this Section 13, in the number or kind of outstanding shares of the Common
Stock, or of any stock or other securities into which the Common Stock shall
have been changed, or for which it shall have been exchanged, then, if the
Committee shall, in its sole discretion, determine that such change equitably
requires an adjustment in the number or kind of shares then subject to any
Option and the number or kind of shares reserved for issuance in accordance with
the provisions of the Plan but not yet covered by an Option, such adjustment
shall be made by the Committee and shall be effective and binding for all
purposes of the Plan and of each stock option agreement entered into in
accordance with the provisions of the Plan.
C. In the case of any substitution or adjustment in accordance with the
provisions of this Section 13, the option price in each stock option agreement
for each share covered thereby prior to such substitution or adjustment shall be
the option price for all shares of stock or other securities which shall have
been substituted for
-4-
<PAGE>
such share or to which such share shall have been adjusted
in accordance with the provisions of this Section 13. No adjustment or
substitution provided for in this Section 13 shall require the Company to sell a
fractional share under any stock option agreement.
14. Purchase for Investment and Waivers.
-----------------------------------
A. Unless the shares to be issued upon the exercise of an Option by a
Participant shall be registered prior to the issuance thereof under the
Securities Act of 1933, as amended, such Participant shall, as a condition of
the Company's obligation to issue such shares, be required to give a
representation in writing that he is acquiring such shares for his own account
as an investment and not with a view to, or for sale in connection with, the
distribution of any thereof.
B. In the event of the death of a Participant, an additional condition of
exercising any Option shall be the delivery to the Company of such tax waivers
and other documents as the Committee shall determine.
C. Each Participant shall be required, as a condition of exercising any
Option which is not an incentive stock option, to make such arrangements with
the Company with respect to withholding as the Committee shall determine.
15. Amendment of Plan.
-----------------
The Board may at any time make such modifications of the Plan as it shall
deem advisable; provided, however, that (i) the provisions hereof relating to
the receipt of Options by directors of the Company who are not employees of the
Company or any Subsidiary, the exercise price and terms and conditions of the
exercise thereof may not be amended more than once in any period of six months,
except as may be required to comply with changes in the Code or the Employee
Retirement Income Security Act of 1974, as amended, and (ii) the Board may not
without further approval of shareholders representing a majority of the voting
power present in person or by proxy at any special or annual meeting of
shareholders increase the number of shares of the Common Stock as to which
Options may be granted under the Plan (as adjusted in accordance with the
provisions of Section 13 hereof), or change the class of persons eligible to
participate in the Plan or change the manner of determining the option prices
which would result in a decrease in the option price, or extend the period
during which an Option may be granted or exercised. Except as otherwise
provided in Section 16 hereof, no termination or amendment of the Plan may,
without the consent of the Participant to whom any Option shall theretofore have
been granted, adversely affect the rights of such Participant under such Option.
16. Expiration and Termination of the Plan.
--------------------------------------
The Plan shall terminate on October 31, 2006 or at such earlier time as the
Board may determine. Options may be granted under the Plan at any time and from
time to time prior to its termination. Any Option outstanding under the Plan at
the time of the termination of the Plan shall remain in effect until such Option
shall have been exercised or shall have expired in accordance with its terms.
17. Options Granted in Connection with Acquisitions.
-----------------------------------------------
In the event that the Committee determines that, in connection with the
acquisition by the Company of another corporation which shall become a
Subsidiary of the Company (such corporation being hereinafter referred to as an
"Acquired Subsidiary"), Options may be granted hereunder to key employees of an
Acquired Subsidiary in exchange for then outstanding options to purchase
securities of the Acquired Subsidiary, such Options may be granted at such
option prices, may be exercisable immediately or at any time or times either in
whole or in part, may be granted without the requirement that the Participant
enter into an agreement with the Company that he will remain in the employ or
service of the Company or a Subsidiary for any required period of time and may
contain such other provisions not inconsistent with the Plan, or the requirement
set forth in Section 15 hereof that certain amendments to the Plan must be
approved by the shareholders of the Company, as the Committee, in its
discretion, shall deem appropriate at the time of the granting of such Options.
-5-
<PAGE>
PROXY COMVERSE TECHNOLOGY, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned shareholder of COMVERSE TECHNOLOGY, INC. a New York
corporation (the "Corporation"), hereby appoints Kobi Alexander, Igal Nissim and
William F. Sorin, and each of them voting singly in the absence of the others,
attorneys and proxies each with full power of substitution and revocation, to
vote all shares of Common Stock of the Corporation which the undersigned is
entitled to vote at the Annual Meeting of Shareholders of the Corporation to be
held on Thursday, December 5, 1996, at 10:00 A.M. (local time), or at any
adjournment thereof, in accordance with the following instructions:
(To be completed and signed on the reverse side.)
A [X] Please mark your
votes as in this
example.
The Board of Directors recommends a vote FOR the election of each of the
nominees identified below and FOR proposals 2 and 3.
<TABLE>
<S> <C> <C>
FOR all nominees WITHHOLD
listed at right (except AUTHORITY
as marked to the to vote for all
contrary below) nominees at right
Nominees: Kobi Alexander
Zvi Alexander
Proposal No. 1. [ ] [ ] John H. Friedman
Sam Oolle
William F. Sorin
Yechiam Yemini
</TABLE>
(Instruction: To withhold authority to vote for any individual
nominee, write that nominee's name on the space provided below)
- ---------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
FOR AGAINST ABSTAIN
Proposal No. 2 --
Adoption of 1996 Stock Option Plan: [ ] [ ] [ ]
Proposal No. 3 --
Ratification of Selection of Auditors: [ ] [ ] [ ]
</TABLE>
The named proxies are authorized to vote in their discretion on such other
business as may properly come before the meeting.
This proxy when properly executed will be voted in the manner directed herein by
the undersigned shareholder. If no direction is made, the proxy will be voted
"FOR" the election to the Board of Directors of the six nominees identified
above and "FOR" Proposal no. 2 and Proposal no. 3.
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY
USING THE ENCLOSED ENVELOPE.
SIGNATURE DATE , 1996
--------------------- ------------------------- -----------
SIGNATURE IF HELD JOINTLY
NOTE: Please sign exactly as name appears hereon. When shares are held by
joint tenants, both should sign. When signing as attorney, executor,
administrator, trustee or guardian, please give full title as such.
If a corporation, please sign in full corporate name by an authorized
officer. If a partnership, please sign in partnership name by an
authorized person.
Typesetter: MG/DONNA/MG Date: Nov. 4, 1996 Time: 12:13 PM proof:#1 Proofreader:
Fax Sent: Monday, Date: Nov. 4, 1996 Time: 12:18 AM
Coordinator: Donna OK to Print
Etx. 261 Fax: 337 Proxy received: Date: Nov. 4, 1996 Time 11: AM Client:
/s/ 11/5/96 12:52
---------------------------------------------
WHEN PROXY OKAYED PLEASE SIGN & DATE IT ABOVE
